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Few Issues Are As Important To A Country As The Long-term Growth And Productivity Trends Facing Their Economy. The Relative Slo
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| Term Paper Title | Few Issues Are As Important To A Country As The Long-term Growth And Productivity Trends Facing Their Economy. The Relative Slo |
| # of Words | 1457 |
| # of Pages (250 words per page double spaced) | 5.83 |
Few issues are as important to a country as the long-term growth and productivity trends facing their economy. The relative slow-down in the growth rates of the United States economy since 1973 has worried economists and politicians alike. Many possible causes have been put forth, though none is fully satisfactory.
Before discussing the theoretical models of growth it would be useful to study the data on growth that is currently available. As Nicholas Kaldor, in his influential article on growth ("Capital Accumulation and Economic Growth"; 1961) stated , a theorist ought to start with the summary of the facts that are immediately available, concentrating primarily on broad tendencies or "stylized facts." Theories can then be constructed to explain the facts. Listed below are the stylized facts as mentioned by Kaldor:
1. Output per worker shows continuous growth.
2. Capital per worker shows continuous growth.
3. The rate of return on capital is steady.
4. The capital-output ratio is steady.
5. Labor and capital receive constant shares of total income.
6. There are wide differences in the rate of growth across countries.
In addition to the above, other researchers have found additional features which are obscure for a wide array of data:
7. Average growth rates show no variations with the level of per-capita income.
8. Growth in trade is positively correlated with income levels.
9. Population growth rates are negatively correlated with income levels.
10. The rate of growth of factors inputs is never large enough to explain the rate of growth; that is, technical progress is essential to growth.
Angus Maddison, in his book, Phases of Capitalistic Development 1982, lists in great detail the empirical aspects of growth during the past two hundred years. This study extends out on the whole Kaldor’s main observations. Both output and capital per worker has shown tremendous growth over time. Even though growth rates have slowed down since 1973, they are at levels still high by historic standards. Similarly, the constancy of the capital-output ratio is borne out by the statistical data of developed countries.
However, Kaldor’s assertion about the constancy of labor and capital shares in total income has increasingly been disputed. As the figures below show:
COUNTRY INTERVAL SHARE OF CAPITAL (%) REFERENCES
Japan 1913-1938 40 Ohkawa and Rosovsky
1954-1964 31
United Kingdom 1856-1873 41 Matthews, Feinstein and
1873-1913 43 Odling-Smee
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